HMRC withdraws EU VAT appeal

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Golf Club Management editor Alistair Dunsmuir argues that HMRC’s withdrawal of its appeal regarding the European Union’s ruling that private members’ golf clubs’ green fees must be VAT exempt will lead to more negative news stories for the golf industry.

Sometimes big stories don’t get the announcement you think they should deserve.

Tucked away last Friday on page 38 of the Tax and Chancery Chamber of the Upper Tribunal’s weekly forthcoming hearings, sandwiched between HMRC’s dismissed appeal against a doctor and a struck out case by a newsagent against HMRC, are the words ‘The Bridport and West Dorset Golf Club Limited – Appeal Withdrawn’.

Yet those words will mean that hundreds of, in some cases very wealthy, private clubs, will now be given scores of millions of pounds of taxpayers’ money.

While this will be a lifeline for several golf clubs that have struggled through the economic downturn, to the public it will mean that the exclusive golf clubs owned by their members that they love to hate, the ones most likely to not allow women to join or establishments that will throw you out if you’re not wearing a jacket and tie, can claim rebates worth anywhere between £115 million and £500 million, according to analysts’ predictions.

The taxpayer will have to fork out six-figure payouts to many of these golf clubs, with some rebates stretching back as far as to 1990.

It wont just be the public that will have a negative perception about this. Almost half of the UK’s golf clubs are owned by individuals or businesses that have already complained about a VAT distortion because their members pay VAT on their subscriptions, whereas members of private golf clubs do not. Even though, in some cases, the only other obvious difference between the two clubs is a road that separates them. Some proprietors have said that this ruling will be the final nail in their clubs’ coffins.

And golfers aren’t best pleased either – it was them, after all, who paid the VAT to play the courses, but there is no legal imperative on the clubs to pass the rebate back to them, despite calls from various groups that they should.

The Revolution Will Be Televised visited Royal St George’s Golf Club last year

Golf gets a rough ride in the media because of its perceived exclusivity. Last year the BAFTA-winning television programme The Revolution Will Be Televised visited and mocked Royal St George’s Golf Club in Kent, because of its refusal to allow women to join, stating that ‘is it really gentlemanly to exclude half the population as members of these clubs?’ What wasn’t mentioned was that less than one percent of golf clubs are single-sex.

The media is also reluctant to highlight the studies in recent years that have shown that playing golf regularly can reduce your chances of suffering from heart disease and strokes, and it tends not to report on the clubs that are community hubs, providing social nourishment to all sorts of members of society who could otherwise be lonely or attracted to socially unacceptable activities. You also wont read about the clubs that are custodians of their local environments or give thousands every year to needy charities in anywhere other than the local or trade press.

This ruling will do nothing to improve the disparity between the perception and the reality of the golfing industry. Even if some clubs use the rebate to provide an affordable leisure activity to people who need it, the headlines will be ‘Millions of your money is paid to rich golf clubs’.

Yes – we knew they would not appeal. HMRC refuses to name the 457 clubs standing behind Bridport. The crux of this is the the Government will hopefully refuse the VAT refunds on the basis of unjust enrichment. The icing on the cake for proprietary clubs would be if HMRC finally grasped the way members’ clubs have routinely evaded tax on green fees – that’s all except poor little Bridport and that’s why KPMG chose them to lead the case! Members’ clubs cannot simply put the green fees in the kitty, spend it and fail to pay tax. HMRC now understand what has happened and hopefully will chase the corporation tax – another £500 million. Has HMRC been very stupid or has there been collusion in not collecting the tax on green fees in the past! Whoops

Dave

This has got to be the most biased and distorted reasoning that I have ever read on these pages. Poor journalism is often characterised by an attempt to sway the reader by trying to exploit common envies or prejudices against “fat cats” benefitting at the cost of the poor and downtrodden (often the “taxpayer”). This is no exception. The fact is that, in terms of the public finances, this is a drop in the ocean it is not a “big story” and will probably only make any negative headlines outside the golfing world if Mr Dunsmuir or others are successful in running this scurrilous angle with the popular press.
To say that the taxpayer will have to “fork out” for this is a total nonsense that turns the facts on their heads. There is a taxation system set out in UK and European law which governs how taxes are levied and, following a proper legal process, the highest court has ruled that HMRC has been incorrectly applying the law and now needs to rectify its error. The rights and wrongs of different parts of the golf industry being taxed in different ways are clearly up for debate but the proper way to address that is via campaigning for a change in the law not by bashing a part of the industry for simply insisting that the current law is implemented correctly.
As for the later comment about private members clubs paying corporation tax – well I’m sure there are many hundreds of them who would love to be in a position to make the profits that would be subject to this tax. Again, if you don’t like the system then lobby to get it changed – but not by sniping and infighting within the industry.

I could not agree more with this article. The private members’ and proprietary clubs will continue to snipe among themselves – as can be seen by the comments here, but the fact remains that once the public find out about this giveaway there will be a backlash just as there was against Muirfield last year.

The government needs to promote the health and fitness of golf to all and make it affordable. That means cutting VAT for ALL golf clubs, not just the fat cats

One assumes that the judgement was made because it was just. Proprietary clubs are in business to make a profit (where vat is paid on the margin) , sure this doesnt help them. Members clubs do not make a profit, its in their constitution, all their earnings get ploughed back into the club for enjoyment of members and visitors alike. If you dont want to pay tax, visit or join a members club. If you want to buy a product from a business ( where you always pay tax) , then play a proprietary course. Simples